The Evolution of Health Insurer Costs in Massachusetts, 2010-12

Kate Ho, Ariel Pakes and Mark Shepard

No 22835, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the evolution of health insurer costs in Massachusetts between 2010-2012, paying particular attention to changes in the composition of enrollees. This was a period in which Health Maintenance Organizations (HMOs) increasingly used physician cost control incentives but Preferred Provider Organizations (PPOs) did not. We show that cost growth and its components cannot be understood without accounting for (i) consumers’ switching between plans, and (ii) differences in cost characteristics between new entrants and those leaving the market. New entrants are markedly less costly than those leaving (and their costs fall after their entering year), so cost growth of continuing enrollees in a plan is significantly higher than average per-member cost growth. Relatively high-cost HMO members switch to PPOs while low-cost PPO members switch to HMOs, so the impact of cost control incentives on HMO costs is likely different from their impact on market-wide insurer costs.

JEL-codes: I11 I13 L10 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-hea and nep-reg
Note: EH IO PR
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Related works:
Working Paper: The Evolution of Health Insurer Costs in Massachusetts, 2010-12 (2017)
Working Paper: The Evolution of Health Insurer Costs in Massachusetts, 2010-12 (2017)
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